Mr. and Mrs. Smith had been married for 40 years. They had a beautiful home that they had paid off several years ago. At age 63, Mrs. Smith was diagnosed with terminal cancer. Mr. Smith did everything he could to make sure she received the best treatment that she could. To pay for her treatments, Mr. Smith amassed a large amount of credit card debt. Unfortunately, Mrs. Smith passed away a year later.

Flash forward a few years, Mr. Smith, now age 68, is still using the majority of his monthly income to pay down his credit card debt. A friend told Mr. Smith about the reverse mortgage loan. After meeting with a reverse mortgage loan representative and a HUD-approved counselor, Mr. Smith decided to take advantage of the reverse mortgage loan. With the money he received from his reverse mortgage loan, Mr. Smith was able to pay off over $25,000 in credit card debt; make necessary renovations to his home; and save some money. Mr. Smith wishes he had taken advantage of the reverse mortgage loan when his wife initially became sick.

What is a reverse mortgage loan?

In 1988, the Department of Housing and Urban Development created the reverse mortgage loan program, a federally insured loan that allows seniors to borrow from a portion of the equity in their homes. Most seniors live on a fixed income. If something arises in their lives, like in the case of Mr. and Mrs. Smith, they can’t afford to pay a monthly loan payment. A reverse mortgage loan enables seniors to easily convert the equity in their homes to cash. However, this mortgage loan is different from other loans, because it doesn’t require the borrower to make regular mortgage principal and interest payments while they live in their home and comply with the loan terms. After the borrower dies, the homeowner’s heirs repay the remaining balance on the loan (typically by selling the home). If any profit remains from the property sale, it goes to the heirs of the estate.

How do you qualify?

To qualify for a reverse mortgage loan, you must:

• Be at least 62 years old.
• Own your home with little or no remaining mortgage.
• Occupy your home as your primary residence.
• Not be delinquent on any federal debt.
• Participate in HUD-approved, reverse mortgage loan counseling – just to make sure you understand everything thoroughly.

Your home must meet all FHA property standards and flood requirements:

• A single family home or a 2-4 unit home with 1 unit occupied by the borrower.
• A HUD-approved condominium project.
• A manufactured home that meets FHA requirements.

Additionally, you will be required to complete a thorough financial assessment of your income, assets, monthly living expenses and credit history. Plus, the timely payment of real estate taxes, hazard and flood insurance may also need to be verified, too.

If you think a reverse mortgage loan might be a solution to your specific situation, contact the mortgage specialists at Grandview Lending. We would be happy to talk with you about the reverse mortgage loan concept to determine if it is the right solution for your needs.

Note: These materials are not from HUD or FHA and were not approved by HUD or a government agency.

Update: The financial assessment requirements are effective as of April 27, 2015.